Infratil gives up on airport after expansion flops

Infratil's four-year ownership of Germany's Luebeck Airport has been a "neutral" investment which failed to deliver hoped-for returns, but did not lose the Wellington-based infrastructure company any money either, it said yesterday.

Infratil yesterday said it had exercised a "put option" on its 90 per cent stake in the airport, 65km from Hamburg, selling its holding back to City of Luebeck.

Infratil's Paul Ridley-Smith said Infratil had paid €10 million ($20.4 million) for the stake in 2005 and it had the right to sell the stake back if certain passenger thresholds were not reached.

The exercise price of the put option was about €25.5 million, which converted, after existing foreign exchange contracts, to $64 million, with payment due early this month.

The sum received by Infratil was equal to the initial purchase price, agreed operating losses, capital expenditure costs and a "standard euro-based" rate of interest.

"It has been a neutral investment for us," said Ridley-Smith.

The recession had been a factor in the airport not meeting passenger number targets, but another was delays in planning applications for a small runway extension which would have allowed budget airline Ryanair to use the airport.

Ridley-Smith said Infratil's other European airports, Kent and Glasgow Prestwick, were "travelling satisfactorily" given the recession in Britain.

"There's no question that has dampened demand at the leisure end of the aviation market."

However, the company hoped demand would recover "once the recession ends".

Infratil, meanwhile, is eyeing retail investor cash to fund its investment in local public infrastructure. It said yesterday it had engaged Craig & Co to investigate the establishment of a retail fund which would invest in its recently announced Public Infrastructure Partnership Fund.

"The fund would be designed to allow retail and sophisticated investors to participate alongside institutional investors in the development of New Zealand social infrastructure assets such as schools, corrections facilities, student accommodation, social housing, hospitals and other public service facilities principally through public-private partnerships," the company said.

Infratil shares closed a cent lower at $1.62 yesterday.